Gov. Rauner's Budget Cuts

Gov. Rauner's budget cuts funding to Medicaid and public transportation, and recommends changes to public worker pension plans. We take a look at what would be the likely impact on services and public worker pensions should Gov. Rauner's proposed budget become law. Joining us are Shriver Center President John Bouman, A.J. Wilhelmi, Chief Government Relations Officer at the Illinois Hospital Association, and Louis Kosiba, executive director at Illinois Municipal Retirement Fund.

Read excerpts from Rauner's Illinois State Budget for fiscal year 2016 on the topics of pension reform, Medicaid, and the Illinois Department of Transportation.

Turning Around Our Pension Burden

To address our enormous pension challenges within the framework of the Illinois Constitution, a major structural change must take place in the pension systems. Governor Rauner proposes several benefit and funding formula changes to turn around our pension debt and payment burdens. His reforms will reduce the State’s general funds payments by an estimated $2.2 billion in FY16 and more than $100 billion over 30 years.

Reforms to New Benefits

The State currently offers two levels of pension benefits – one plan for those first hired before 2011 and another, more affordable plan for more recent hires. The Governor proposes legislation to put in a “freeze” on the level of benefits that employees hired before 2011 have earned as of July 1, 2015. For work after July 1, 2015, these employees’ newly earned benefits will be based on the plan that now applies to employees and officials first hired or elected after 2010. Going forward, benefits will be fair and equal among all employees.

View a graphic on the reforms to new benefits. Hover over the image to learn more.

The governor’s proposed reforms are conservatively projected to reduce the state’s general-funds payments in the next budget year by $2.2 billion. Over the next 30 years, these reforms will save the State over $100 billion. In addition, the reforms are projected to immediately reduce the State’s unfunded liabilities by $25 billion, improving our funded ratio.

To ensure that only those who are eligible for state assistance receive Medicaid services, HFS will reinstate aggressive review of all those on the Medicaid rolls. Currently, there are more than 250,000 people receiving Medicaid services whose eligibility has not been reviewed. Increasing the integrity of the Medicaid system will ensure that money goes only to care for those who qualify for help, and will free up dollars to help those most in need. New and aggressive techniques will also be used to detect and prevent fraudulent and abusive billing practices by providers. Combined, the department estimates that these actions will save or avoid nearly $75 million in abuse and waste.

This budget will recognize over $41 million in savings by moving people off of medical assistance from the state and onto the healthcare exchange established by the Affordable Care Act. Federal subsidies to purchase insurance will be available to those who are of lower income.

IDOT’s fiscal year 2016 recommended budget is $2,570,366,800. Recognizing the key roles that transportation plays in economic development, the administration works closely with IDOT to select key transportation projects throughout the state that help improve safety, enhance mobility, preserve the intermodal infrastructure and make the best use of available state funds while leveraging federal and private funds to the best advantage for all of Illinois. Due to operational efficiencies taken in budgeting for the fiscal year 2016 recommended budget, the annual road construction element supported by the road and state construction fund is $1.85 billion, over a $120 million increase from fiscal year 2015. This increase is an important first step in addressing the long-term quality of the statewide road and bridge system.
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The fiscal year 2016 recommended budget discontinues non-core programs that benefit only select areas. Operating subsidies and programs for specific local transit systems have been modified to be more affordable and sustainable, while continuing to deliver transportation services to commuters. These subsidies and programs include the County Engineer Compensation Program ($3.6 million Road Fund), the reduced fare subsidy for PACE Paratransit ($8.5 million all funds), the subsidy for Regional Transportation Authority ($17.6 million Road Fund) and the I-FLY grant ($1.5 million in other state funds).

The fiscal year 2016 recommended budget also includes a $20 million reduction in Road Fund support to AMTRAK. This will reduce the operating subsidy back to the fiscal year 2013 level, from $46 million to $26 million. Matching rates to the Regional Transportation Authority (RTA) and downstate public transit systems will also be reduced. The general funds matching rate to the RTA is being reduced to 20 percent of the local tax. This is a 4.4% reduction from the RTA’s estimated revenues for 2015 and an estimated $127 million state savings in the general revenue fund for fiscal year 2016. At the same time, the State of Illinois will continue to provide the full $131 million of support for the RTA’s Strategic Capital Improvement Bonds. The fiscal year 2016 recommendation lowers the match rate for subsidies to downstate public transit systems, but by covering 55 percent of their overall expenses, the state will still be the primary funder. This achieves an estimated $75 million in general revenue fund savings from fiscal year 2016 maintenance.

Read a statement from Ty Fahner, President of the Civic Committee of The Commercial Club of Chicago.

“Though extremely difficult, Governor Rauner’s budget proposal is among the most politically courageous plans we have seen in Illinois. Clearly, the Governor recognizes the deep financial issues facing Illinois and the need to live within our means. For too long, fiscal irresponsibility has plagued our state, despite warnings that this day was coming. It is now up to lawmakers to work with the Governor to finalize a plan which will shore up our fiscal house, protect our state’s most vulnerable and bring Illinois back to economic and social prosperity.”

Read a statement from Maryjane A. Wurth, President & CEO of the Illinois Hospital Association.

“Illinois’ Medicaid program is in the midst of great transformation, with new ways to deliver care, improve outcomes and achieve savings, as a result of major reforms enacted in recent years. More than 115 hospitals across the state are part of innovative systems, such as Accountable Care Entities and Care Coordination Entities, that coordinate care for Medicaid enrollees to ensure the best outcomes and control costs. These reforms have reduced Illinois’ spending on Medicaid by more than $1 billion since 2012.

However, the Governor’s Medicaid proposal – a drastic $1.5 billion spending cut (roughly 10%) as well as harmful policy changes – would take the state in the wrong direction and undo the substantial, groundbreaking progress being made to transform the Medicaid program and the state’s health care delivery system. It will also hurt the economy. For example, a 10% spending cut to hospitals alone would mean the loss of more than 8,200 jobs and $1.1 billion in economic activity.

Many of our families, friends and neighbors rely on Medicaid for their health and well-being. It is the health insurance program for one out of every two children in Illinois, and for one in four Illinoisans – kids, adults, seniors and individuals with disabilities or mental illnesses. The program is cost effective and provides taxpayers with a significant return on investment:

Illinois ranks 49th in the nation in Medicaid spending per enrollee – substantially lower than all other Midwestern states and large states (e.g., Minnesota is 9th; Ohio 17th; New York 2nd; Pennsylvania 7th);

State taxpayer costs per Medicaid beneficiary have dropped an average of 1.2% per year over the past decade;

75% of Medicaid payments to Illinois hospitals are from non-state sources;

Through federal matching funds and a hospital provider tax, hospitals and health systems provide $400 million in additional funding to non-hospital providers such as community clinics and nursing homes; and

Every hospital job supports more than 1.2 additional jobs for our local economies.

To the extent that the State does not adequately fund Medicaid, these unfunded costs are shifted to middle class families through higher insurance premiums, co-pays and deductibles.
To have a healthy, productive workforce in a competitive economy, Illinois needs to responsibly fund its Medicaid program. We urge the Governor and General Assembly to invest in health and not leave our most vulnerable residents behind.”